NEW YORK The North American steel market will see stronger sales in 2014 and 2015 with improving construction markets and overall economic conditions expected to boost the steel industry, Gerdau SA executives said in a conference call with investors Oct. 31.
"Despite all the uncertainties related to the debt ceiling, we remain optimistic that the U.S. market will post improvements in the next year," Gerdau president and chief executive officer Andre Gerdau Johannpeter said. "In 2014, there should be improvement in the North American economy of 2.6 percent (gross domestic product) growth, and steel consumption should grow by 3 percent, mainly driven by the automotive, power and non-residential construction industries."
The outlook for an improved U.S. market comes after a weaker third quarter for Gerdaus North American operations compared with the same period last year.
The Porto Alegra, Brazil-based company saw a decline in shipments and a 33.6-percent year-on-year fall in profit margins in the United States in the third quarter due to slow overall GDP growth, tepid construction activity, and high levels of imports.
"In the United States and Canada, we sold 1.6 million tonnes, 9 percent less compared to the third quarter of 2012, and this was a consequence of a high level of imports in the period and the fact that the market was weaker than expected," Johannpeter said.
The companys profits also took an $8-million hit due to the temporary closure in August of its Cambridge, Ontario, melt shop (amm.com, Aug. 6), where it is now sourcing billets from its Whitby mill.
But construction and macroeconomic indicators point to an improvement over the next couple of years in U.S. sales, Johannpeter said, with the architectural billings index (ABI) reaching 54.3 in September (amm.com, Oct. 31) and the purchasing managers index (PMI) reaching 56.2, and the International Monetary Fund indicating a likely 2.6-percent GDP growth in 2014 vs. 1.6 percent in 2013.
"For 2014 and 2015 the prospects are better, since GDP indicates growth of 2.7 percent and steel consumption (growth of) 3.7 percent, and people believe well see a rebound in the nonresidential construction market. And also infrastructure is improving in many states, and there seems to be more money for infrastructure in some states," Johannpeter said.
Gerdau Long Steel North America was among five U.S. rebar mills to file a trade petition to investigate rebar from Turkey and Mexico, and if trade relief is granted, pressure from imports could ease next year (amm.com, Oct. 30).
"GDP was lower than expected and this was reflected in construction, our main market, and the imports were above average and spreads were pressured, which was reflected on our margins," Johannpeter said. "(But) for the next two years, we expect conditions to improve, though its very difficult to say exactly how much."